Gold: Maintaining Bearish Posture

If anybody still have doubt that market is not concern about more QE tapers, they only need to look at price action of Gold yesterday. Despite the supposed taper fears arising from "hawkish" FOMC minutes, Gold prices continued to climb higher instead of lower. This rebound in prices appears to be pure technical based, with prices climbing higher after hitting Channel Bottom.

Hourly Chart

If the above observation is correct, the likelihood of prices rebounding lower after hitting Channel is higher, opening up a move towards Channel Bottom. Stochastic readings agree with Stoch curve peeking into the Overbought region, looking likely to form a bearish cycle signal in the near future should price breaks soft support of 1,225.

Daily Chart

Daily Chart remains bearish with Channel Bottom as ultimate bearish target. Nothing much has changed in Stochastic levels since the last analysis was done, and the bearish cycle remains in play. However, strong bearish conviction may only take place if the soft support of 1,215 is broken, which may result in acceleration lower towards Channel Bottom with 2013 low as interim support.

On a separate note, there are studies into the sudden plunge that depressed Gold prices which suggest that the culprit is for the sudden decline is not a sloppy trader with fat fingers. There are evidences that point the culprit as a high frequency trading house that place numerous large contracts within milliseconds. This is good news for bears, as it shows that some institutional speculators (e.g. Hedge funds) are starting to clear their long positions which they have bought when prices were between sub and low 1,200 levels, and at least one of them is nervous enough about this long-term Gold trend that they would rather clear all their positions in such a hurry. If this sentiment is prevalent throughout other institutions, a strong bearish push may not be that far away after all.

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